Talk:Austrian business cycle theory

The Great Depression

Despite the fact that they disagree on the reasons, monetarists agree with austrians on what (who) caused the Great Depression:

Ben Bernanke: Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

http://www.federalreserve.gov/boarddocs/speeches/2002/20021108/default.htm

They agree WHO to blame, but certainly not for WHAT. —Preceding unsigned comment added by 87.205.47.215 (talk) 22:12, 25 July 2008 (UTC)

Central Banks

The role of central banks should be mentioned here somewhere, since the trade cycle first appeared with the creation of national monetary authorities (such as the Bank of england). Earlier cycles where highly localised and overinflating banks were punished by competition (ie: wildcat banks in the US), only wars and major political upheavals could affect time-preferences on a national or international scale prior to the onset of fiat currencies.

Copyvio

From the last paragraph in the "Theory" section:

Since it clearly takes very little time for the new money to filter down from business to factors of production, why don't all booms come quickly to an end?

This is a wholecloth rip from Murray Rothbard's America's Great Depression, as you can verify here. This sentence could probably be used as a quote, but it certainly shouldn't be uncited. It also makes me wonder how much of the article is plagiarized. DickClarkMises 21:17, 2 March 2007 (UTC)

plagiarism

This article has been plagiarized from an article at the Mises Institute website (especially the opening paragraph). See here. I am going to attempt to rewrite the article in order to make it not only respectful of copyright, but something resembling well-written. Life, Liberty, Property 02:20, 31 August 2007 (UTC)

Great, when are you going to start doing that? Four months later and it's still garbage. --76.224.69.130 (talk) 03:50, 24 November 2007 (UTC)

Just for starters...banks "make" money...really?

"When banks create new money, whether by printing bank notes or entering bank deposits..." Anybody want to clarify this with independent, third-party sources meeting WP:RS that define "printing bank notes" or "create new money"? Flowanda | Talk 01:05, 5 August 2008 (UTC)

Are you unfamiliar with the Federal Reserve System? The Federal Reserve is the central bank of the United States. I don't think anyone would seriously dispute that. DickClarkMises (talk) 06:10, 5 August 2008 (UTC)

While I hesitate to speak for Flowanda, it may make sense to clarify the different senses of "bank" and "money". Generally, only central banks print money, and private banks create a different kind of money than central banks. As written, the statement obfuscates more than it clarifies due to this conflation of different concepts.--Gregalton (talk) 13:31, 5 August 2008 (UTC)

Cleaner and meaner

I'd been meaning to get to this for a while. I finally got my teeth into this and chewed away for awhile. I hope you agree it's cleaner and sharper now, with an excellent, comprehensive, topical reference from Polliet included for good measure. This reference is the best "condensed" summation of ABCT I have found - other than this even better, wittier, pithier piece by the Famous Mogambo Guru. I'd add The Mogambo in, but I feel sure it would be deleted by WP guardians on the basis of The Mogambo not being a "reliable" source. —Preceding unsigned comment added by LetThemMintPaper (talk • contribs) 10:38, 2 September 2008 (UTC)

• Thanks for taking the time. It is a definite improvement. It's a tough theory to encapsulate in a concise way. --RayBirks (talk) 13:33, 2 September 2008 (UTC)

Good job!

This article was mentioned in this news article: [1] (MSNBC). DickClarkMises (talk) 04:06, 4 September 2008 (UTC)

If, through this article, just one person actually reads (and understands) "The Great Trilogy" (The Great Depression (Rothbard), Human Action and The Theory of Money and Credit (von Mises)) I will be able to die a happy little puppy. - LetThemMintPaper (talk) 04:12, 4 September 2008 (UTC)

If they followed that up by reading The Mystery of Banking I'd die even happier. - LetThemMintPaper (talk) 04:24, 4 September 2008 (UTC)

Origins & Questions sections need to be wikified

The first half of the article needs to be rewritten and wikified.

The origins section is entirely a block quote from Roger Garrison. This raises numerous issues WP:SOAP, WP:NOTMIRROR, WP:NPV and copyright issues as well.

Leading questions as in the Questions section also aren't appropriate, as wikipedia is not a textbook, WP:NOTTEXTBOOK, and it potentially violates NPV as well.

Also, care should be taken not to use 'the encyclopedic voice' when stating the Austrian viewpoint. ie. preface all non-mainstream views with 'austrian economic theorists state', 'according to austrian economic theory', etc. If possible, opposing viewpoints should be integrated into the text, so that it doesn't read as if wikipedia is endorsing a particular point of view.

I suggest Fairtax as a reference. It's an excellent article that has taken care to be NPV on a very contentious issue.

lk (talk) 07:40, 4 September 2008 (UTC)

Come on, let's be reasonable. A couple of points: (1) Many times the article states "Austrian theorists believe" or "Austrian theorists state...". Saying this over and over in an article on ABCT would be repetitive (bordering on ridiculous) (2) This isn't contentious - the article accurately reflects the references (have you read the refs?). The theory itself is the theory. Whether it's right or not (in an absolute sense) is completely irrelevant to this page. If you want to work on business cycles please feel free. That page is a mess! It looks like someone vomited out the page. Given the unmitigated disaster that is business cycles, your comments on this page are...how should I put this...a little on the "nit picky" side. The quote is necessary to show the background. It's not even close to a copyright violation given it's not a "substantial" copy. I'd leave it, and encourage you to go to business cycles and make sure that's kept "mainstream". Austrianism has been so brutalized on WP before it's clear there's no way of making it "mainstream". Other than mutilating it. The theory is what it is. Read the refs before making judgments. Add all you want on the "other views" at the bottom of the page (I encourage neo-Keynesians in particular to add their stuff at the end, especially on the "paradox of thrift"). But please don't try to amend yourself. Somehow I don't think it will work. - LetThemMintPaper (talk) 07:55, 4 September 2008 (UTC)

In reply to (1) I agree that in many places, the article does preface with "Austrian theorists state...". I added some of these myself. However, articles must be careful about stating things in the encyclopedic voice, unless they are undisputed facts. Thus trumps considerations of repetitiveness. As for (2), one can argue that the fairtax is what it is as well. However, this article does not just descibe the pure theory, it relates it to the real world. And ABCT purports to describe how the real world functions. This makes it contentious. As for 'Origins', having a section that is entirely a quote does not make a good article. I suggest that you read the WP:QUOTE on this issue. Lastly, I hope you're not suggesting that you object to my making edits to the page. Remember WP:OWN. lk (talk) 15:07, 4 September 2008 (UTC)

You're curiously coy about business cycles. No comment on that I see. Too shy to admit it's currently garbage? Admittedly the fact that business cycles is currently a dog's breakfast does not mean your criticisms here are invalid. I just think you should prioritize your life and if you're interested in this topic, WP desperately needs someone (knowledgeable?) to work on business cycles. You seem to be implying you know your stuff on the topic, so I encourage you to start on that page. I myself have no interest in "improving" mainstream economics or neo-Keynesian economics or business cycles as I had to read that rubbish for my degree and have no interest re-visiting the land of the living dead. - LetThemMintPaper (talk) 23:12, 4 September 2008 (UTC)

It's probably no use asking, but do try to be civil. I have been cleaning up econ articles for the last year, thanks for asking, but given the scope of wikipedia, one cannot expect to fix all articles on topics that one has knowledge off. I assume you've had a couple of econ classes in college. That does not make you an expert on the subject. Wikipedia is not supposed to be balkanized into various parts where various independent groups write contradictory articles, it supposed to reflect the current scientific consensus on an issue, as represented by the latest academic peer-refereed writings on the issue. Keep in mind WP:SOAP and WP:OWN. lk (talk) 09:14, 5 September 2008 (UTC)

Be careful my friend. You have no idea who you are talking to. I agree you may have "knowledge off" the subject, but all I am trying to do is re-direct your substantial intellectual powers to more productive pursuits. Economic theory suggests that "low hanging fruit should be picked first" (i.e. obvious pricing errors should attract the most immediate attention from the free market). Business cycles is so obviously "mis-priced", it's literally crying out for attention. Why not take a bite off that first?

WP should have consistent standards of form, but it shouldn't be an Orwellian text with zombified, mindless, robotic, zealot-like adherence to one school of intellectual (or economic) thought. Your comment that the substance (not just the form) of all articles on WP should be completely consistent across the various schools of thought is a dangerous, mistaken belief. Very dangerous.- LetThemMintPaper (talk) 10:10, 5 September 2008 (UTC)

Just to be clear, you're not my friend, and I don't like to be threatened. I'ld like you to reflect for a moment. You seem to be reacting very strangely to the observation that the the first two sections of this article need to be wikified; and that contentious statements should not be made in the encyclopedic voice. lk (talk) 13:27, 5 September 2008 (UTC)

"I'Im" "reacting" not to your observation regarding form (which I clearly acknowledged are legitimate concerns). "I'Im" "reacting" to this very specific, very "strange" comment "you'youself" made above: "I assume you've had a couple of econ classes in college. That does not make you an expert on the subject. Wikipedia is not supposed to be balkanized into various parts where various independent groups write contradictory articles, it supposed to reflect the current scientific consensus on an issue, as represented by the latest academic peer-refereed writings on the issue."

I'I don't agree that "contentious" schools of thought should be censored by those hostile to those hostile to the mainstream. Let's be open about this: Austrianism (particularly ABCT) is about as "hostile" to the current central bank-dominated orthodoxy as you can get. As is clear from the refs, this stuff is contentious and contrary to the mainstream. Paul Krugman is never going to invite Robert K. Landis to a family dinner on Thanksgiving. But ABCT deserves to live unmolested by those from the orthodox mainstream. And business cycles deserves your immediate attention. - LetThemMintPaper (talk) 22:05, 5 September 2008 (UTC)

I suggest that you read through WP:NPV. Wikipedia is supposed to reflect current scientific consensus, as reflected by peer-reviewed non-self-published articles (see WP:SOURCES). This is true in both articles about mainstream theories and fringe theories. This isn't my opinion on how things should be, they are generally accepted guidelines on what Wikipedia should look like. But relax, all I'm suggesting is that the first 2 sections need to be wikified. lk (talk) 20:11, 6 September 2008 (UTC)

I have changed the section title to indicate that the entire section is the assertions of the theory. This is a much cleaner way of attributing the several assertions to the ABCT rather than to the article itself. The repeated use of "Austrian theorists believe" and "Austrian theorists state..." is awkward, annoying, and distracting. Dscotese (talk) 04:02, 10 September 2008 (UTC)

Origin of central banks and recessions

The United States didn't really have a central bank until the Federal Reserve around 1913. Yet there were vicious recessions and bubbles prior to then (see list of recessions in the United States). I'm guessing that Mises was aware of this, and had some sort of explanation. That would make this current article's lead misleading. But maybe he didn't? Can anyone shed some light on this issue? II | (t - c) 03:04, 16 September 2008 (UTC)

• I'm not sure if Mises himself was aware of the particulars of banking history in the United States. After arriving in the U.S. from Europe in 1940 at the age of 59, his first order of business was to write Human Action in English (based on a similar earlier German work) for its eventual publication in 1949. By then his student Murray Rothbard took on the task of studying American banking. His The Panic of 1819, America's Great Depression, and History of Money and Banking in the United States should explain just about everything you want to know. Part One of this last work has around 120 pages about the pre-Fed U.S. banking system, including the Bank of North America and the First and Second Banks of the United States, all of which functioned as early versions of central banks. The full PDF text of this last work is found here: http://www.mises.org/Books/historyofmoney.pdf . --RayBirks (talk) 04:09, 16 September 2008 (UTC)

Hey! Thanks so much for the prompt reply. I'm not sure I agree that those early banks would qualify as central banks. Did they act as lenders of last resort? Did they have exclusive control over the creation of banknotes? Were they able to flex the money supply and affect interest rates? I read a book recently which argued that they should not be considered central banks (Kicking Away the Ladder by Ha-Joon Chang). Without the ability to lower interest rates through artificially increased money supply, it seems as if these banks cannot be considered central banks for the purposes of Austrian theory. Thus a vicious business cycle existed before the central banks ... and it is a fact that recessions have become less common in the 20th century. I'll take a look at Rothbard's book, but I would appreciate it if you could give me a quick nutshell Austrian rebuttal. You know that Friedman and Bernanke believe that the Great Depression was caused the government not increasing (temporarily) the money supply enough in the wake of the stock market crash?

Anyway, the Tulip mania bubble certainly precedes central banking. Bubbles just happen. II | (t - c) 05:35, 16 September 2008 (UTC)

Its arguable if Tulip Mania actually was a significant bubble, but that's neither here nor there. I've written up a bit about crashes pre-WWII, and also added cites for economists who state that cycles damped down after central banks started getting involved.lk (talk) 07:26, 16 September 2008 (UTC)

Unfortunately, your sources don't directly make the point, meaning that you've synthesized to do original research. I'm not going to take 'em out, but it would be much better to find someone directly targeting the Austrian cycle with this point. II | (t - c) 07:29, 16 September 2008 (UTC)

I've edited the statement to make it clearer what the references do and don't say. I think this makes it one of the better cited statements in the article. lk (talk) 11:26, 16 September 2008 (UTC)

I checked your sources and they don't talk about the Austrian school. That means that you can't use them to criticize the Austrian school without breaking WP:OR. -- Vision Thing -- 18:36, 17 September 2008 (UTC)

That is not a reasonable argument. This is like reverting citations about satellites and circumnavigations on a page about flat earth theory because the writers did not directly try to refute the flat earth question. However they directly address the topic of whether the earth is round. Similarly, I believe this page can cite articles that are about Business Cycles, they do not have to be directly arguing against the Austrian business cycle theory. lk (talk) 05:32, 18 September 2008 (UTC)

Where in the "Flat earth" do you see a discussion about satellites and circumnavigations? WP:OR is clear on this: "If the sources cited do not explicitly reach the same conclusion, or if the sources cited are not directly related to the subject of the article, then the editor is engaged in original research." Subject of this article is "Austrian Business Cycle Theory" and you sources are not talking about it. -- Vision Thing -- 16:48, 18 September 2008 (UTC)

Bubbles don't just "happen". If you believe that, you belong on the business cycles page or the neo-Keynesian economics page or the neo-classical economics page. Bubbles happen wherever you have speculative fractional-reserve banking activities. It is the Austrian contention that through misguided distortion of the banking system from a centralized payment clearing house and limited financial intermediation service, to a fully-fledged and fully-supported speculative casino (with the Fed allowing moral hazard to proliferate like a cancer), two things happen: (1) the boom-busts become more severe, as the booms are longer (supported by the Fed's low interest rates) and (2) the effect on the economy more severe because more people are in debt and more people are therefore affected by the "financial services" industry. Because they happen less frequently does not mean civilization (or Wall Street) has evolved beyond simple and obvious counterfeiting of the money supply through the issuance of debt to every sentient being. Like a spring beyond wound up, it just means the collapse is more severe. I cannot believe this stuff is not obvious to those who have read Rothbard. Then again, those who are editing this page probably do so in complete ignorance of Rothbard's extensive writings on this subject.

The issue is not that bubbles occur (there are always going to be snake oil salesmen, door-to-door hucksters, Ponzi schemers... and fractional reserve bankers...and investment banks). The issue is whether they dominate the economy or whether they are a wandering, marginal, semi-criminal part of society. Rothbard wanted gold at the center of the monetary universe and focused his life on full-reserve banking because his detailed study of crashes (America's Great Depression and the The Panic of 1819) revealed that several factors always preceded huge financial crises: (1) a "monetary" boom (2) the use of fiat/paper currency to "break out" of the shackles of gold (3) a preceding, incredibly stupid fashionable, speculative bubble that made the "innovators" rich and the "idiots" destitute. The key for Rothbard was to limit and kill off the nascent bubble, not fix it after it had blown up. He wanted to arrest Ponzi before he started the game, not wait for Ponzi to flee to Geneva (and offload the economic disaster on future generations of taxpayers) before looking for potential solutions.

Please I'm begging you all to read Rothbard's extensive writings before commenting or editing. My blood pressure is bad as it is, and you may all be pushing me into an early grave. Ray Birks is the only guy saving me from a stroke.—Preceding unsigned comment added by 165.228.245.66 (talk) 00:16, 17 September 2008 (UTC)

Edits

Could I ask for just a few simple courtesies: (1) could those hostile to ABCT or ignorant of ABCT and who think they know something about economics (eg have a PhD from a reputable university) please clean up business cycles urgently before making edits on this page (2) could those (few) who know something about ABCT (eg actually studied it at university) please discuss edits on this page first. Thanks. —Preceding unsigned comment added by 165.228.245.66 (talk) 23:52, 16 September 2008 (UTC)

165.228.245.66 are you LetThemMintPaper? You make exactly the same points. lk (talk) 04:19, 17 September 2008 (UTC)

Yes, but so what? This trivial issue is dealt with on Gregalton's talk page. LetThemMintPaper (my favorite sockpuppet) has died, so I can't use that one anymore and have run out of imaginative socks. Why don't you ever deal with the substantive issues? There are just 4 (FOUR) references in business cycles! 4! When are you going to clean up that vomit on business cycles? Doesn't it make you sick? - 165.228.245.66 (talk) 05:14, 17 September 2008 (UTC)

Recent Agency Models

I've added this interesting piece into the references. If I read it correctly, the article is suggesting that equilibrium based models (prevalent in neo-Keynesian economics and neo-classical economics) do not capture the real dynamics of financial markets, and these more realistic, computer-based agency models do confirm at least some of the contentions of the Austrian School. Fascinating. Could someone please reference Thurner, Farmer and Geankoplos's work once it comes out. Thanks.-GoldbugVariations (talk) 13:15, 18 September 2008 (UTC)

Keeping here until consensus is reached over at WP:OR/N

Visionthing, do try to be civil. You edit summary is impolite. As you know, consensus was reached, unfortunately, it broke again as new editors weighed in. lk (talk) 03:07, 22 September 2008 (UTC)

Keeping edit here until consensus is reached:

The Austrian school's theory claims that business cycles are caused by central banks' manipulation of the money supply. However, researchers have found that economies have experienced less severe boom-bust cycles after World War II, since central banks have started using monetary policy to stabilize economies.

No offense, but your claim of consensus was pretty premature. I said it was original research; Doug Weller didn't really come down on any side, and Eubulides said it wasn't original research. I don't see how you got consensus out of that. Anyway, have you read the critiques of all the mainstream figures we've found? I haven't. That would be the best place to start. My Review of Austrian Economics subscription only goes back to 1997, so I haven't seen that full Tullock paper. If none of these guys mention this critique, you should perhaps wonder whether it is a fair criticism. II | (t - c) 03:48, 22 September 2008 (UTC)

I think the Tullock paper is available online. I've read the first few pages - seems pretty legit. (I didn't read the back and forth though.) Also Tullock is a very credible figure, have a look at his page on Wikipedia - very impressive. lk (talk) 07:33, 22 September 2008 (UTC)

Speculation regarding motivation = Slur

David Laidler's (who is he?) speculations regarding the motivations behind the promotion of the theory are (1) irrelevant (2) inherently speculative (3) dangerously close to a slur. If someone suggested the present bailout of investment banks by the govt was "in part" motivated by Treasury officials having sexual relations with some bankers who would benefit from the bailout, this would rightly be considered an outrageous slur, and completely irrelevant to the substance of the bailout package. It is the intellectual equivalent of an ad hominem argument and shouldn't be included here, nor should this kind of speculation be added to any WP page (eg speculations regarding Keynesians being in bed with govt, Monetarists being in bed with the Fed etc etc). These are all ad hominem arguments amounting to slurs. I have removed them in keeping with LK's policy of "civility" on WP. - 202.6.153.120 (talk) 23:09, 22 September 2008 (UTC)

Sock puppeting through anonymous IPs

The use of anonymous IP socks to avoid bans and to back up each others arguments and revert avoiding 3RR is clearly prohibited. Edits by anonymous IPs that suddenly show up on this page evidencing knowledge of the arguments here and Wikipedia in general is prima facie evidence of sock puppetry. Edits by such socks are prima facie unwanted, as such, any user may revert these additions (see WP:BAN#Enforcement by reverting edits). lk (talk) 04:36, 23 September 2008 (UTC)

Good to see you're focusing on the substance of the arguments once again. Your intellect continues to impress. Despite being a mainstreamer and open critic of Austrianism (comparing it to witchcraft and pseudoscience!) you have not made one substantive amendment or contribution on business cycles, neo-Keynesian economics or mainstream economics. These pages are clearly "sub-standard" (to put it mildly). Please impress us all by actually making substantive edits to your "own" pages. —Preceding unsigned comment added by 165.228.168.160 (talk) 04:44, 23 September 2008 (UTC)

You've reverting again. Childish. No reason given. I rest my case.